Twitter’s stock soared after the company posted better than expected earnings and user growth in its quarterly report. Shares in the social media company jumped as much as 35% in after-hours trading on Tuesday, following the most impressive quarterly earnings report since Twitter went public.
The San Francisco-based company now boasts 271 million monthly active users, a 16 million increase over the past three months. That 6.3% growth beat analyst estimates, with predictions polled by Bloomberg expecting an increase to just 267 million. Twitter’s monthly unique users grew 5.88% and 3.87% in the previous two quarters.
Part of the reason was undoubtedly the FIFA World Cup, which drew huge numbers of people to the service. Twitter CEO Dick Costolo said on an earnings conference call: “During the World Cup, we delivered the kind of events experience that I’ve wanted to see from us for some time.” Twitter revealed that during the tournament, more than 672 million tweets were sent by users, more than any other event in its history. In an interview with CNBC, Costolo also claimed product changes helped boost numbers.
Twitter also beat expectations on revenue and earnings per share. Revenue reached $312 million, comfortably beating analyst estimates of $283.07 million. And the company posted EPS of $0.02 versus the -$0.01 predicted by Wall Street. However, not disregarding stock based compensation and acquisition costs, Twitter made a net loss of $145 million, or $0.24 a share.
Although investors reacted extremely well to the earnings report, there are still some causes for concern. The spike in user numbers could be attributed almost entirely to the World Cup, which ran through June and July. It may well prove difficult for Twitter to maintain that growth rate without a major event such as the World Cup on the horizon. Also, the company is still not making money and its user numbers are dwarfed by that of its rival for advertising, Facebook, which boasts 1.32 billion monthly active users.
One of Twitter’s main focuses will be to try and engage more with the huge audience the social media platform attracts, but doesn’t necessarily draw in as users. These users are viewing Twitter and using it as a resource, but do not actually Tweet, log in or engage with the platform, and the company believes this larger audience is two or three times larger than its current user base. Costolo sees these ‘off network’ people as a huge opportunity going forward.
Mobile advertising revenue, which made up 81% of total sales, continues to increase, which provides further encouragement to investors. If Twitter can apply that successful to the wider off network audience, then perhaps the company will soon arrive in profit.